HFRX Indices June 2010 Performance Notes

The HFRX Global Hedge Fund Index declined by -0.94% for the month of June, bringing the YTD 2010 performance to -1.20%.

The weakest area of hedge fund industry performance was Equity Hedge strategies, with the HFRX Equity Hedge Index declining by -1.38% in June. All EH sub-strategies posted declines for June, with the most significant weakness in Fundamental Growth strategies, which declined by -2.85% for the month. Fundamental Value strategies posted more modest declines, with these posting a loss of -0.65%, while Equity Market Neutral declined by -0.77% in June, maintaining a gain of +1.93% for the 1H10.

Partially offsetting weakness in Equity Hedge, the HFRX Relative Value Arbitrage Index posted a gain of +0.29%, adding to the YTD gains to post a +1.29% gain for 1H10. Credit-focused Convertible Arbitrage and RV: Multi-Strategies were positioned for the financial market volatility and falling US yields which ensued in June, with both posting small gains in June to add to YTD gains; with each of these gaining +1.92% and +3.23% for 1H10, respectively.

The HFRX Macro Index posted a decline of -1.32%; as with the previous month, losses in fundamental, discretionary Macro strategies offset gains in Systematic trend following strategies. In total, Macro strategies have declined by -2.32% in 1H10 but the diversified, quantitative, systematic, trend-following funds gained +0.64 in June, with long positions in developed market fixed income offset weakness in currencies & commodities. Similar to the Financial Crisis of 2008, Systematic Macro strategies are the top areas of industry performance in 1H10, posting a gain of +4.53%.

The HFRX Event Driven Index posted a decline of -0.53% on corporate credit weakness, slowing M&A environment, increasing risk aversion and widening deal spreads, bringing 1H10 performance to -0.73%. The weakest area of ED performance was Distressed strategies, which declined by -3.73%, paring 1H10 gains to +0.38%. Merger Arbitrage and Special Situations funds posted declines of -0.58% and -0.48% in June to pare 1H10 performance in each of these to +0.13% and +0.03%, respectively.